Bitcoin blazed the trail, creating the first generation of crypto billionaires and blockchain entrepreneurs. In its wake, altcoins have been cropping up everywhere as potential gateways to gains. Although this cryptocurrency craze brings great opportunity, it also brings a wealth of cryptocurrency scams.
“This new frontier of digital, decentralized finance can be a labyrinth for new investors,” says Eric Mitchell, Sports Analyst and Head of Media at LifeFlip Media. “There are many bad actors who know that, and seek to take advantage of those who are just beginning to explore the complex world of cryptocurrencies.”
Positioned at the nexus of talent, content, brands, technology, and sports – LifeFlip Media creates limitless opportunities for the storytellers, trendsetters, icons, and thought leaders who shape popular culture. Across film, television, music, sports, digital media, marketing, and beyond, we represent actors, directors, writers, producers, musical artists, comedians, authors, athletes, coaches, chefs, designers, fashion talent, consumer brands, and more.
And, just like with traditional pump-and-dump schemes and other stock scams, there are signs you can look for to avoid falling for fraud. Here are 5 cryptocurrency scams to avoid, according to Mitchell:
#1 – DeFi Put Off the Stroke
DeFi, or decentralized finance, is an attempt to refurbish and transform the traditional methods and models of today’s financial infrastructure. While some reputed DeFi platforms ensure maximum returns on lending money, some are scams through and through.
Such feigned platforms lure investors into lending money by promising heavy profit, but pocket the money the investors lend. Such scams are so craftly executed that investors often fail to recover the lost amount.
#2 – Nonfungible Token Scams (NFT Scams)
Nonfungible tokens, or NFTs, are in popularity in the current times. NFT runs the risk of being duplicated.
It contains specific hashtag codes and the one who is in charge of the hashtag codes holds the power. There are reported cases that NFT hack recovery is difficult as deciphering hashtag codes is not a layman’s job.
#3 – Pumps and Dumps of Altcoin
An altcoin is often counted as one of the cheapest and illiquid penny stocks with small market caps.
The crypto pump and dump are characteristics of penny stocks and altcoin to join the flow. However, altcoins being volatile often fall into the hands of scammers and criminals.
#4 – Scams Caused by Viruses and Malware
New strategies and creative attempts to breach into an investor’s wallet can at times be tedious.
To circumvent this overwhelming number of new ways to execute wallet breaches, hackers and criminals resort to age-old malware and viruses to gain access to crypto wallets.
For this reason alone, two-factor authentication can be a protective shield for crypto-wallets.
#5 – Fake ICO’s
Fake initial coin offerings, or ICOs is an issue that is still prevalent and worries out crypto investors.
In 2017, we witnessed an explosion of ICO scams when the rate of ICOs touched 80%. Fortunately, the number had degraded in the following years.
Fake ICOs remain to be a matter of concern to investors even today. Big Coin stole $6 million from customers.
For more information on these types of scams, you can watch Mitchell’s in-depth analysis below:
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